Thank you for your comment regarding the
Federal Trade Commission's proposed consent agreement relating to the
acquisition of Supermercados Amigo, Inc. ("Amigo") by Wal-Mart Stores,
Inc. ("Wal-Mart"). The Federal Trade Commission ("Commission") has
concluded that there is reason to believe that Wal-Mart's acquisition of
Amigo would violate Section 7 of the Clayton Act and Section 5 of the
Federal Trade Commission Act. The agreement requires Wal-Mart's
divestiture of all of the acquired Amigo stores in three geographic
markets, the areas of Puerto Rico in and near Cayey and Cidra (the "Cayey"
market), Ponce and Juana Diaz (the "Ponce" market), and Barceloneta,
Manati, and Vega Baja (the "Manati" market), to Supermercados Maximo, Inc.
The Commission believes that the required divestiture eliminates the
anticompetitive effects that otherwise would have resulted from the
acquisition.

In your comment, you express a number of
concerns. You emphasize the need for transparency in the merger
investigation process, ask us to explain in more detail the basis on which
the geographic markets were defined, and object that the consent order
permits the divestiture to occur prior to the expiration of the public
comment period.

Transparency

You begin by stressing the importance of
transparency in the Commission's investigative process, a point with which
we agree. The Commission strives to provide transparency with respect to
information that can be made public and, as a reflection of those efforts,
comments and responses regarding the instant transaction will be posted on
the FTC's website. It is, however, important to note that while we have
attempted to address your concerns in this response, Commission Rule
2.34(c), 16 C.F.R. § 2.34(c), provides that, when the Commission publishes
a proposed consent agreement for public comment, it will provide "an
explanation of the provisions of the order and the relief to be obtained
thereby and any other information that it believes may help interested
persons understand the order." The Analysis of the Complaint and Proposed
Decision and Order to Aid Public Comment ("Analysis") in this matter
satisfied these requirements. It explained the order provisions and the
relief to be obtained and it published all other information that the
Commission believed would help interested persons understand the order.
The rule does not require that the Commission publish a synopsis of its
investigation or a discussion of any or all approaches that were
considered and rejected during the investigation.

The public comment period is for the
Commission's benefit. The primary purpose of the public comment period and
of the Analysis is to invite the submission of comments that will assist
the Commission in assessing the proposed consent agreement. The question,
therefore, is whether the Commission has enough information to make a
correct decision. The information available to the Commission includes not
only the public comments but also, of course, the factual information and
analyses developed by the staff during the course of the investigation.
The Commission is satisfied that the information received in response to
the invitation for public comment, together with all of the other
information available to the Commission, is adequate for it to evaluate
the proposed agreement.

It is worth noting that the Commission
has on occasion gone beyond the requirements of the rule and discussed
matters that may be of interest to outside observers. The Commission is
committed to transparency and in appropriate cases the Commission or
individual Commissioners will explain to the extent possible why decisions
were made. However, their willingness to provide this information in
individual cases should not be taken as a commitment to do so in all
cases.(1)

Market Definition

You question why the Commission limited
its divestiture to the Cayey, Ponce, and Manati markets in Puerto Rico.(2)
As it does in every investigation, the Commission considered market
definition on an intensely factual, case-by-case basis, using its
long-established approach and methodology for market definition in the
context of supermarket mergers. The Commission staff defined relevant
antitrust markets in which to assess the proposed acquisition only after a
careful examination of business operations, consumer purchasing patterns,
and other circumstances applicable to Puerto Rico. Unlike commentators who
had to speculate on market definition, concentration, and other issues,
the Commission compelled the parties to the acquisition and others to
produce (on a confidential basis) commercially sensitive information to
make its assessment of the proposed merger.(3)
Based on this and other information, the Commission has determined that
the effect of the Wal-Mart/Amigo acquisition, if consummated, may be
substantially to lessen competition in these three geographic markets and
not in other areas. In each of the markets in which the acquisition would
threaten competition, the Commission's consent order requires the
divestiture of all of the acquired stores. Further, based on the
information available to it, the Commission concluded that divesting
additional stores was not necessary to ensure Maximo's competitive
viability. Under these facts, requiring additional divestitures in markets
not threatened by anticompetitive effects would be an improper exercise of
the Commission's authority, and could deprive consumers of substantial
benefits.

You specifically inquire as to why there
were no divestitures required in the cities of San Juan, Bayamon, and
Carolina, all of which are situated in the San Juan metropolitan area, and
Caguas, which is immediately south of the San Juan area. The Commission
found that the merger would not significantly lessen competition in any
possible relevant geographic market in the San Juan metropolitan area
because there would continue to be extensive competition post-acquisition.
Moreover, in addition to the high number of competitors already present,
the area is subject to substantial additional entry and expansion by
competitors other than Wal-Mart and Amigo.(4)
As a result, there is no basis for concluding that the Wal-Mart/Amigo
transaction would be likely to cause anticompetitive problems in any part
of the San Juan metropolitan area.

Buyer and Divestiture
Approval

Your comment raises concerns about the
Commission's practice of permitting divestitures (and the underlying
transactions) to close--with the Commission retaining the right to require
rescission--before the public comment period expires. As you note, this is
a long-standing policy of the Commission in supermarket mergers. In
determining whether to allow a divestiture to occur prior to the
expiration of the public comment period, the Commission balances at least
two concerns. Allowing divestitures to occur quickly serves the public
interest in restoring marketplace competition and in avoiding damage to
the competitiveness of the stores to be divested. On the other hand,
delaying divestitures until the public comment period expires might help
avoid the consumer confusion and competitive harm that you suggest would
result if the Commission concluded, based on the public comments, that the
divestiture was inappropriate, and accordingly required rescission and
re-divestiture to another buyer.

In the Commission's experience, it is
particularly important to accomplish supermarket divestitures as swiftly
as possible, because allowing stores that are to be divested to remain in
the hands of the merging parties for any length of time can lead to sales
declines, customer abandonment, and even store failure. It has also been
the Commission's experience that the likelihood that additional
information obtained during the public comment period will require
rescission and re-divestiture is low, particularly given the extensive and
often confidential information on which the Commission's experienced staff
bases its recommendations. Accordingly, in balancing the relevant
concerns, the Commission has consistently concluded that the injury that
would result from delaying divestitures--both to competition in general,
and to the competitiveness of the stores to be divested in
particular--outweighs the benefits that might be provided by delay.

Conclusion

We appreciate your concerns and the time
you took to comment in this matter. After careful consideration of your
comment and other materials, the Commission has determined to accord final
approval to the consent order in this matter, without modification. Please
let us know whenever we can be of assistance.

By direction of the Commission,
Commissioner Anthony recused.

Donald S. Clark
Secretary

1. We also appreciate
your comment on the various statements in the cruise line matter. You
should understand, however, that similarly comprehensive explanations are
not always appropriate or possible. But where it is appropriate and
possible the Commission will no doubt continue to elaborate on its
decisions.

2. In a footnote, you
express concern that these geographic markets contain a relatively small
percentage of the island's population, but such measures are irrelevant
for antitrust purposes.

3. In its
investigation, Commission staff sought and considered information about
the likely competitive effect of the proposed acquisition from numerous
sources, including retailers and distributors of supermarket items. The
information provided by these sources often was valuable; for example,
such information played an important role in the Commission's conclusion
that in Puerto Rico the relevant product market includes club stores in
addition to supermarkets. In considering the submissions of incumbent
firms, however, the Commission is careful to recognize that their
interests do not necessarily correspond to those of consumers. Such firms
often ignore or understate their ability to respond to competition, and
treat pro-competitive efficiencies as threats.

4. Caguas may be
considered part of an "extended" San Juan metropolitan area, and is also
characterized by extensive supermarket competition. The evidence did not
indicate that the merger would significantly lessen competition in the
smallest possible relevant geographic market that includes Caguas.